Weak rand to sit tight
Celebrity economist Dawie Roodt explains how the global market is keeping South Africa’s economy in its less than desirable place.
THE rand is unlikely to soar for at least another two years as developed economies fight to keep their top spots in the world market.
This is the grim forecast of renowned Efficient Group Chief Economist Dawie Roodt, sharing his extensive knowledge of the global and national economic climate at a business gathering hosted by the Zululand Chamber of Commerce and Industry (ZCCI) in Richards Bay on Tuesday.
Roodt said while South Africa was an attractive hub for investors seeking strong returns last year, the USA has since recovered from its government shutdown debacle and debt ceiling crisis to reclaim the shine.
‘The USA has implemented massive fiscal and monetary stimulation through quantitative easing,’ said Roodt.
‘They are printing $55 billion every month out of thin air for banks to keep interest rates at a specified target value and it has revived the USA’s economy, but pushed up prices for certain SA commodities like gold.
‘This put pressure on the rand, caused inflation rates to rise and dampened our economic growth.
‘But while the USA’s economy is performing better at the moment, this massive stimulation is not sustainable over a long term.
‘Once they are forced to stop, I expect emerging markets like ours to rise and for the rand to climb in two to three years.’
Other global threats are Japan and Europe, currently looking to devalue their currencies to support their export markets and protect local industries, potentially making them more competitive than South Africa.
Trade protection laws are also being implemented around the globe, which will make trading between countries a lot trickier.
Roodt stated the only way to attract investors back to South Africa is to offer them better returns on their investments.
Inflation forecast
Local consumers could see the Reserve Bank push up interest rates by 250 basis points before the end of the year, followed by another 100 points next year, Roodt predicts.
And while crude oil prices are anticipated to drop significantly from $104 to $90 at the end of this year, SA motorists will probably not see the commodity’s cost cut reflected in petrol prices.
‘If we see a drop in fuel prices, it will be marginal,’ said Roodt.
He predicts economic growth of 2.1% this year.
‘But with a bit of bad luck, we can have growth even lower than 2% owing to strikes on platinum mines and Eskom’s infrastructure failures.’
